Analog Devices Posts Strong Fiscal Q2

BROOKLYN, N.Y. — Analog, mixed-signal, and DSP vendor Analog Devices Inc. (ADI) posted strong second fiscal quarter results on strength in all of its key market sectors, including industrial, automotive, and communications, which accounted for 89% of revenue.

Revenue reached $695 million, up 5% year-over-year and 11% sequentially, while net income reached $187.4 million from $164.5 million in the year-ago quarter and $152.6 million in its first fiscal quarter of 2014. Diluted EPS was $0.59, beating consensus estimates by $0.03.

ADI’s president and chief executive, Vincent Roche, said order rates continued to improve at its largest customers, a trend that began in its first fiscal quarter of 2014.

“In addition to continued optimism at our largest customers, total orders were higher than in the prior quarter across all our end markets, and we finished the quarter with a book-to-bill that was above 1,” Roche said, during a conference call with analysts on May 20. “These trends, coupled with inventories that are in good position and recovering demand for capital goods, we believe are positive signs for our business in the third quarter ’14.”

In its third fiscal quarter 2014, the company expects revenue to increase between 1% and 5% sequentially, and diluted EPS of $0.60 to $0.64.

Business conditions in the industrial sector, which accounted for 47% of ADI’s second-quarter sales, were better than expected. Sales grew 5% year-over-year and 13% sequentially, buoyed by burgeoning demand from the instrumentation sub-sector, as well as the wireless and semiconductor test equipment industries. Regionally, Europe and North America, which accounted for over two-thirds of its industrial sales, chalked up double-digit growth.

“The industrial sector is indeed the backbone of ADI with a very diverse customer base of tens of thousands of customers and long lifecycle products with sustainable profitability,” Roche said. “We believe the industrial sector has the potential for both market growth rates driven by the need for more intelligent, connected, and energy-efficient products.”

Communications infrastructure revenue grew 25% year-over-year and 11% sequentially, which also beat ADI’s expectations. Roche attributed the robust growth in the communications infrastructure segment, which accounted for 23% of revenue, to “strong base-station deployment in China and the capacity build-outs in the U.S.” As more 4G LTE-enabled devices hit the market, ADI expects to capitalize on the trend as it provides advanced RF devices designed to improve the efficiency of these wireless networks.

The automotive segment, which generated 19% of ADI’s second-quarter revenue, was up 10% from the year-ago quarter and 9% sequentially. The increase was fueled by increasing content and vehicle unit growth, as well as strong demand for premium vehicles in the US and China. In addition, revenue improved as new vehicles continue to incorporate more safety features, such as radar-based advanced driver assistance systems to avoid collisions.